EU Blocks 'Near-Monopoly' of D.Boerse-NYSE Merger

By IBT Staff Reporter On 02/01/12 AT 6:56 AM

Detail seen at the NYSE Euronext cash markets operations room at the transatlantic stock market operator responsible for the proper functioning of the Paris, Brussels, Amsterdam and Lisbon stock markets in Paris August 19, 2011. Photo: REUTERS

(REUTERS) -- European Union regulators have blocked the merger of exchange operators Deutsche Boerse and NYSE Euronext to avoid giving them a stranglehold on the European futures market.

Deutsche Boerse and NYSE Euronext, which unveiled the plan to create the world's biggest stock exchange as long ago as February last year, said they would now unwind the deal, the sector's fourth failed tie-up attempt in a year.

The European Commission said Wednesday that the combined entity would make it hard for new players to compete.

The merger between Deutsche Boerse and NYSE Euronext would have led to a near-monopoly in European financial derivatives worldwide, EU Competition Commissioner Joaquin Almunia said in a statement.

These markets are at the heart of the financial system, and it is crucial for the whole European economy that they remain competitive. We tried to find a solution, but the remedies offered fell far short of resolving the concerns.

Deutsche Boerse and NYSE Euronext had refused to sell either the German operator's Eurex derivatives market operator or the U.S. company's London-based futures exchange Liffe to address such concerns.

NYSE said it would return $550 million to shareholders via a share repurchase program and seek to grow its derivatives business.

While we viewed the merger as a way to accelerate our plans, our existing business model was always central to our strategy, NYSE Euronext Chief Executive Duncan Niederauer said in a statement.

We will also take advantage of our financial strength to capture opportunities for growth in derivatives, and through our new initiatives, including technology services, NYSE Liffe US/NYPC and post-trade services, he said.

Deutsche Boerse said it was positive about the outlook for this year despite the failed deal.

The Hessian economics ministry, Deutsche Boerse's home regulator in Wiesbaden, Germany, had said Tuesday that the exchanges had not eased its legal concerns over the deal. The ministry was planning to issue a decision after the Commission's ruling.

U.S. regulators approved the merger in December last year on condition the exchanges sell a minor asset.

In the past year the sector has seen three other large deals fail.

Nasdaq and IntercontinentalExchange Inc's bid for NYSE Euronext was rejected by the U.S. Department of Justice, London Stock Exchange's takeover of TMX Group was rejected by shareholders of the Toronto Stock Exchange operator, and Singapore Exchange Ltd's bid for Australia's ASX Ltd was stopped by the Australian government.

(Additional reporting by Edward Taylor and Christoph Steitz in Frankfurt, Editing by Sebastian Moffett and Will Waterman)

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